Catholic teaching on usury?

[HomeschoolDad]

I have two questions about the Catholic teaching on usury (charging of interest on loans):

• As I understand it, at one time the Church taught that interest in any amount — not just “biting” or “excessive” interest — could not be charged by a Christian loaning money to someone else. If necessary, we were allowed to pay interest to a non-Christian moneylender (the Jews of the time fulfilled this role), but we could not do it ourselves. The only kind of loan a Christian could make to another person was a zero-interest loan. Then, in late medieval times, it seems as though the teaching changed, and that a distinction was made between, as I said, “biting” or “excessive” interest, and a lower rate of interest. How did the Church change her teaching? This sounds like, for instance, a hypothetical future situation where the Church could say something like “if you seek to control the size of your family, you must first try natural family planning, but if you try and that doesn’t work, then you can use artificial methods, just be moderate in how you use it”. In other words, a tolerance of a comparatively small evil, even if it is an intrinsic evil. In short, was charging interest on money ever taught as an absolute, intrinsic evil?
• It is my understanding (and this is a simplification) that the Church’s one-time teaching on usury stated that charging interest is a sin against justice, “charging for an item and for use of an item on top of that”. This doesn’t make sense to me. For example, if I loan my neighbor $100,000, and ask that it be paid back in five years, I have been deprived of the use of that money, and my neighbor gets to use that money instead. In that five years, I could have invested that money in real estate, the stock market, starting a business, what have you, and earned a profit. For that matter, I could have used that money to meet expenses of my own. But I did not have use of it, my neighbor did. Should I not, then, be compensated for lack of access to my money, and missed opportunities to do something with it, by some moderate rate of interest that, at least in the case of investment, would roughly compensate me for what I would have otherwise earned with it? Far from being a sin of injustice to receive interest, would it not be a sin of injustice to be deprived of compensation?

Again, the notion of “you can’t rent money” — which is basically what lending money is — doesn’t make sense to me. I can rent someone a car, or a machine, or even land, or what have you, so why can’t I rent money? All of these things are assets, and moreover, assets of which I have been temporarily deprived. The modern Catholic concept of usury (i.e., lending money at a fair, legitimate rate of interest being moral, lending at an exploitative rate of interest is immoral) would surely make allowance for this. But the ancient and medieval concept would not make such an allowance.

What am I missing here? And how do I refute the claim that "the Church changed its teaching on usury to allow what was previously forbidden (therefore it could change its teachings on other moral issues to do likewise)?

 

[Asinner]

I was interested in this recently too, and I read multiple Catholic Answers articles on this topic (links at the end). I’ll try to summarize my understanding as best as possible, and am open to any correction or clarification:

The teaching on usury has not changed at all, but our understanding/use of money has dramatically changed from medieval times so that now simply charging interest for a loan of money is no longer considered usury. The key is exactly what you said earlier:

In that five years, I could have invested that money in real estate, the stock market, starting a business, what have you, and earned a profit.

In modern times, money is viewed as a capital asset because you can use it for business purposes, to make more money. But in medieval time, money was viewed as nothing more than a consumable asset, no different than flour or nuts or bacon. So if lets say I had an extra bag of flour I didn’t need right away, I could lend it to someone who needed it. But I could only demand a return of one bag of flour at a later date, not any more flour. The reason is that otherwise I could do nothing with that flour other than consume it myself, so as long as I get it back on time, I don’t get to charge interest. In the same way, at the time having money wasn’t good for anything other than spending it; there weren’t all of these money making ventures you mentioned earlier.

Now I’m not an expert in how all of this changed, but I’m guessing it has at least something to do with the Dutch East India Company and publicly traded stock. Anyway, it is interesting to think about what does constitute usury in the modern world, because usury is intrinsically evil, but simply charging interest is not.

Did the Church Change Its Stance on Usury? | Catholic Answers Magazine

Usury | Catholic Answers Encyclopedia

 

[Evan]

In the parable of the Talents, Mt 25:14-30, the man was told that instead of burying the 1 Talent, he should have deposited it and he would have, at least, received interest. Sound to me like an acceptable way to hold you money until needed

 

[MPat]

It is my understanding (and this is a simplification) that the Church’s one-time teaching on usury stated that charging interest is a sin against justice, “charging for an item and for use of an item on top of that”. This doesn’t make sense to me.

You should start by looking at the definition of usury.

Fifth Council of Lateran says: “For, that is the real meaning of usury: when, from its use, a thing which produces nothing is applied to the acquiring of gain and profit without any work, any expense or any risk.” (Session 10, 1515-05-04, Julius II and Leo X).

Now, what risk is there when one lends money now? First, there is a risk of inflation, then there is a risk of borrower going bankrupt and not giving the money back.

But both kinds of risk were not anywhere as significant a thousand or two thousand years ago. Inflation was negligible, debtors who could not pay back would end up in debt slavery, debtor prison or something like that.

 

[vern_humphrey]

Spain vigorously enforced the usury laws – no interest allowed to Christians. As a result, Spain, awash with gold and silver from the Americas, failed to prosper.

No interest, no credit. No credit, no expanding economy.

Look at the book of Acts – in the days before Luke wrote, everyone who joined the Church gave all his property and was subsisted by the Church. But they were no longer doing that in Luke’s time – they had eaten all their seed corn and gone bankrupt. Which explains why Paul was so zealous to collect money for the Church at Jerusalem.